U.S. Proposal for WTO Hong Kong Ministerial Conference: What's at Stake for Cotton Producers?

This study analyzed the cost to U.S. cotton producers of two policy alternatives under which the U.S. seeks to cut its total AMS payments for cotton by 60%. We considered two scenarios; the U.S. decides to act unilaterally versus conducting the policy initiative along with multilateral tariff and subsidy eliminations from the Rest of the World. The study found a 12% cut in target price and 8% cut in loan rate are necessary to reach the 60% AMS targeted reduction under the unilateral scenario. In that regards, U.S. net farm income decreases considerably despite an appreciation of U.S. farm price. Under a multilateral trade liberalization from the Rest of the World, a 9% cut in the loan rate and 4% in loan rate are enough to reach the AMS reduction threshold. The study found there is 20% chance that net farm income would appreciate and 80% chance that it would decline. However, the decline is less severe compared to the situation where the U.S. acts alone. Overall, the sole beneficiaries in both policies are mainly the major exporters such as Brazil, Australia, West Africa, and Uzbekistan.

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Conference Paper/ Presentation
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JEL Codes:
Q11; Q17
Series Statement:
Selected Paper

 Record created 2017-04-01, last modified 2018-01-22

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